Macroeconomic Policy

ByAlbert Berry, Dionisio Borda

The appropriate objective of public finance—i.e., government taxation and spending—is to contribute to economic growth and the welfare of the population through a state revenue system that minimizes the negative impacts on taxpayers and through spending that maximizes benefits. Monetary policy seeks to manage the supply of money and the interest rates in such a way that the rate of inflation is kept within an acceptable range and that the financial system performs its function of intermediating between savers and investors, guaranteeing reasonable rates of return and security and thereby raising the level and efficiency of investment and promoting economic growth. Meanwhile, management of the exchange rate has the task of maximizing benefits from international trade and capital flows and the administration of public debt.